Bangalore: Mundra Port and Special Economic Zone Ltd (MPSEZ) has put in a revised price bid to Chennai Port Trust to build a Rs 3,686 crore container-handling facility.
The port authorities decided to renegotiate an earlier bid with India’s biggest private port operator as the quotation submitted was too low.
Mundra Port. File photo
MPSEZ, the only entity to submit a price bid from a list of seven, had offered a revenue share of 1.5% to Chennai port in September to develop and operate the new terminal with a capacity to load four million standard containers a year.
This is the lowest revenue share quoted by a private firm to a state-owned port in the history of India’s container port privatization programme that began in 1997.
According to the privatization policy, an entity or group willing to share the most from annual revenue with a government-owned port gets the contract, typically for 30 years.
At a meeting on 24 November, the board of trustees of Chennai port discussed the price bid submitted by MPSEZ and decided to set up a committee to re-negotiate a higher price bid with the firm promoted by Ahmedabad-based Adani Group.
“The committee had discussions with the firm on the reasons for the low price bid and cleared some of their apprehensions. After this, we told MPSEZ to put in a revised price bid, which was submitted on 10 December,” a spokesman for Chennai Port Trust said. “The revised price bid will be opened soon.”
“We can’t make any comment on that (the revised price bid),” said Rajeeva Sinha, a director at MPSEZ, citing a confidentiality clause signed with the port.
Vijay Sarma, a director at Deloitte Touche Tohmatsu India Pvt. Ltd, attributed the depressed bidder interest and low price bid to the “high project cost and a potential slow traffic build-up due to competition”. “A lot of supply is being created in and around Chennai, and demand will take a time to build up,” he said.
Chennai Port had earlier said that the 1.5% revenue share quote, submitted by MPSEZ earlier, was not acceptable to it as container terminal privatization deals in India had seen such quantum range from 35% to 50%.
MPSEZ had, however, defended the low quote arguing that the high cost of the project, including a Rs 1,200 crore investment to be made by the firm to build a 4.23km-long breakwater, did not justify a higher revenue share.
A breakwater is an offshore structure to break the intensity of waves and is typically funded by port authorities in India and overseas.
In case the Chennai Port finds MPSEZ’s revised price bid unacceptable, its next option will be to call for fresh bids from all seven shortlisted entities, its spokesman said.
The new terminal will be 18-22m deep, allowing large container ships to dock.
Chennai, India’s second-biggest container port, currently has two container loading facilities that are run separately by DP World and PSA International Pte Ltd with a total capacity to handle 2.8 million standard containers a year.